MNI China Daily Summary: Tuesday, August 13

     DATA: Foreign direct investment (FDI) into China in July rose 4.1% y/y to

$8.07 billion, the Ministry of Commerce said on its website. That compared with

a 3% y/y increase to $16.13 billion in June. FDI into China for the first seven

months rose 3.6% to $78.8 billion, the ministry said.

     LIQUIDITY: The People's Bank of China (PBOC) injected CNY60 billion via

7-day reverse repos, adding liquidity for the second day with a net injection of

CNY60 billion given no reverse repos matured, according to Wind Information. The

reverse repo rate was kept unchanged at 2.55%, according to the PBOC.

     RATES: The 7-day weighted average interbank repo rate for depository

institutions (DR007) rose to 2.7379% from Monday's close of 2.6614%, Wind

Information showed. The overnight repo average rose to 2.6823% from 2.6345% on

Monday.

     YUAN: The yuan closed at 7.0669 against the U.S. dollar from 7.0679 on

Monday. The PBOC set the dollar-yuan central parity rate above 7 for a fourth

trading day at 7.0326, weaker than 7.0211 on Monday.

     BONDS: The yield on the 10-year China Government Bond was last at 3.0025%,

down from Monday's close of 3.0100%, according to Wind Information.

     STOCKS: The benchmark Shanghai Composite Index fell 0.63% to 2,797.26. Hong

Kong's Hang Seng Index decrease 2.10% to 25,281.30.

     FROM THE PRESS: The U.S. labeling China as a "currency manipulator" won't

change China's forex policy, and it will continue the path of financial reform

and opening markets, Pan Gongsheng, the deputy governor of the PBOC and director

of the State Administration of Foreign Exchange, commented in the PBOC-run

Financial News. The forex market will stabilize after a brief shock, and there

won't be a disorderly devaluation of the yuan, which is supported by a resilient

economy, Pan said.

     The PBOC is expected to increase counter-cyclical monetary policy

adjustments after a significant drop in M2 in July, the China Securities Journal

reported. The PBOC is expected to cut corporate financing costs and selectively

reduce the reserve requirement ratios after M2 fell to 8.1% y/y in July from

June's 8.5%, the journal said citing interviews with analysts. A contraction of

off-balance sheet financing and lack of credit supply were the main reasons for

a decline in the M2, the newspaper said.

     The PBOC is likely to inject liquidity through reverse repos and

medium-term lending facility (MLF) to offset the maturity of MLF and higher

demand for cash for tax payments, the China Securities Journal reported.

Decreasing forex purchases may reduce liquidity of the domestic currency, so the

PBOC may need to prevent a further decline, the journal said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]